In Clarilogic v. FormFree Holdings, the Court Of Appeals upheld the District Court for the Southern District of California holding that the claims of U.S. Patent Application No. 8,762,243 (‘243 Patent) are ineligible under 35 U.S.C. § 101 because they are directed to an abstract idea and contain no additional elements that transform the nature of the claims into a patent-eligible application of the abstract idea.
patents binders isolated on the wooden table. 3D illustration.
The ‘243 Patent is entitled “System and Method for Electronic Account Certification and Enhance Credit Reporting.” Generally, the claimed computer implemented system gathers a potential borrower’s financial data from a third party, applies an “algorithm engine” to the gathered data, and outputs a report. The claims do not recite any specific rules implemented by the “algorithm engine.” Rather, the rules implemented by the “algorithm engine” are obtained from third parties who define rules used to identify information.
The Court noted that when “the focus of the claims” is “on collecting information, analyzing it, and displaying certain results of the collection and analysis,” the claims are directed to an abstract idea. Moreover, claiming an algorithm engine without defining a specific set of rules implemented by an algorithm engine performing the analysis is the “height of abstraction.”
Defendant Form Free argued that its invention is “transformative” and thus eligible for patent protection. Specifically, Form Free argued that the invention is “transformative” because it takes in financial data and outputs a report. The Court disagreed, stating that the claimed method simply changes the way electronic information is displayed using an unknown and unclaimed algorithm engine. As such, without any limitations in how the gathered data are changed, there is no “transformative” effect. After all, as the Court stated, “Data are still data.”
A business method claim, or any other type of method claim, must specifically define all the method stops including those that help make the method novel. Single processing data to arrive at an output is simply too abstract to be patent eligible subject matter.
The SEC’s Latest Guidance on Applying Federal Securities Laws to Tokenized Securities
On January 28, 2026, staff of the U.S. Securities and Exchange Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement clarifying how existing federal securities laws apply to tokenized securities. The SEC’s “Statement on Tokenized Securities” does not establish new law, but it does provide greater clarity on the […]
Common Legal Mistakes NYC and New Jersey Business Owners Make
Operating a business in the New Jersey and New York City metropolitan region offers incredible opportunities, but it also requires navigating a dense and highly regulated legal environment. From entity formation to regulatory compliance, seemingly minor legal oversights can expose business owners to significant risk. In our work with businesses throughout the region, our attorneys […]
High-profile founder litigation is more than just a media spectacle. For startup founders, these cases underscore the legal and structural risks that can arise when rapid growth outpaces formal oversight. While launching a new company can be both an exciting and deeply rewarding endeavor, founders must be mindful that it also comes with significant risks. […]
Corporate Governance Reviews: A Practical Guide for New Jersey Companies
Every New Jersey company should periodically evaluate its governance framework. Strong corporate governance protects directors and officers, builds investor confidence, reduces litigation exposure, and positions a company for sustainable growth. The first quarter of the year is a great time to evaluate your corporate governance practices and perform any routine maintenance needed to keep that […]
What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights
Being served with a lawsuit is one of the most stressful legal events a business or individual can face. Whether the claim involves a contract dispute, an employment matter, an intellectual property issue, or another legal challenge, the actions you take in the first few days can significantly shape the outcome of your case. Acting […]
Will 2026 Be a Banner Year for SPACs? Understanding the Risks and Opportunities
Special Purpose Acquisition Companies (SPACs) continue to gain momentum as we move through 2026. After enduring a significant contraction following the 2021 boom and the regulatory scrutiny that followed, SPAC activity rebounded sharply in 2025 and now carries forward into 2026 with real momentum. The SPAC resurgence reflects broader improvements in both market conditions and the […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
